Putting Some of the Reform Back Into Health Reform

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NOTE: On Sunday, CBO changed its long-term estimates of cost savings, which it said were based on a misunderstanding of this bill. Please see this update.)

Given the drama and suspense of the past few weeks, it’s understandable that the first round of commentary about the new Senate health bill would focus on the deals that Majority Leader Harry Reid had to make to bring aboard all 60 of the votes that he will need to beat a Republican filibuster. Senate Minority Leader Mitch McConnell went so far as to declare it “a monstrosity, a 2,100 page monstrosity full of special deals. This is not renaming the post office. Make no mistake, this bill will reshape our nation and our lives.”

But while you might think that all this horsetrading would produce a weaker and more bloated bill, it appears that, by some measures at least, the opposite may have happened. The preliminary analysis suggests that the new bill would actually be more effective than the previous version in reining in health care costs in the long term. To use the current Washington cliche, it would do a better job “bending the curve.” Congressional Budget Office Director Douglas Elmendorf put it this way in his blog:

Relative to the legislation as originally proposed, the expected reduction in deficits during the 2020–2029 period is larger for the legislation incorporating the manager’s amendment. Most of that difference arises because the manager’s amendment would lower the threshold for Medicare spending growth that would trigger recommendations for spending reductions by the Independent Payment Advisory Board.

What Elmendorf is talking about is this: As I had written a couple of weeks ago, Reid’s earlier bill had taken the teeth out of one of the proposals that economists had considered a “game changer.” It is a new board that would come up with proposals to bring down Medicare costs, largely taking the job out of Congress’ hands. (Medicare is such a big player in the overall health market, spending more than $450 billion a year, that the private industry often follow its lead.)

Reid’s earlier version would not have allowed the board to act unless Medicare spending grew faster than overall health care spending–something that pretty much doesn’t happen these days. The new version is signficantly stronger, thanks in no small part to pressure from the Obama White House and a group of reform-minded freshman Senators. It would trigger action from the board if growth in health care spending exceeds that of Medicare spending, which is pretty much guaranteed to be the case.

All of that sounds pretty technical, but getting the details right is the difference between a health care bill that will work and one that won’t, economists say. And many experts have been worried about the direction the bill appeared to be headed.

There’s also another potentially significant improvement buried down in fine print of the bill: The new version expands the pilot project that tests the concept of “bundling” health care payments–an effort to get doctors and hospitals and other health care providers to work together more closely by paying them with a lump sum to treat a specific condition, rather than for paying each one of them according to how many services they provide. The idea here is both to save money and to get them to focus on which treatment is most likely to be best for the patient. Health care experts believe this is one of the single most important moves that could bring about a transformation of our health care system.

Even more important, Reid’s new version would allow the Health and Human Services Secretary to expand the pilot program nationally, if it proves to be successful. Under the earlier bill, she would have had to come back to Congress for permission–something that, given the clout of the medical industry on Capitol Hill, would pretty much guarantee that it would never happen.

Will these kinds of changes be enough to really transform the system? Not on their own. And even these are far from a sure thing, especially as the bill moves into conference. (The House refused to establish an independent Medicare commission, for instance, and opposition there remains strong.) But the fact that they have been made suggests that there are still those on Capitol Hill who remember that bringing down health care costs was one of the reasons they began this whole exercise in the first place.

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